Iron ore price falls to two-week low on caution ahead of Fed rate action

Federal Reserve Chair Jerome Powell. Credit: Yahoo Finance via YouTube

Iron ore price hit a two-week low on Wednesday as caution prevailed ahead of a widely expected interest rate hike from the US Federal Reserve.

According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $96.24 a tonne Wednesday morning, down 1%.

The most-traded January iron ore on China’s Dalian Commodity Exchange ended daytime trade 0.9% lower at 703.50 yuan ($99.79) a tonne, after reaching its weakest since Sept. 8 at 686.50 yuan earlier in the session.

The Fed is widely expected to hike rates further by 75 basis points later in the day to tackle high inflation.

“If the interest rate is raised by 100 basis points, it will be bad for financial markets,” Zhongzhou Futures analysts said in a note.

“Although the recent replenishment of raw materials by steel mills has led to strong cost support, the macroeconomic environment at home and abroad is still not optimistic,” Huatai Futures analysts said separately.

The Asian Development Bank cut its 2022 and 2023 growth forecasts for developing Asia, citing mounting risks from rising borrowing costs across the world, the war in Ukraine and covid-19 lockdowns in China.

The lender expects China’s economy to expand 3.3% this year, a further step down after previously trimming the forecast to 4.0% from 5.0% in April.

(With files from Reuters)